ABSTRACT
Kaldor’s well-known formula for a ‘Keynesian’ approach to income distribution1 is, of course, an identity. Its contents follow directly from our definitions of income, saving, investment, saving propensities, wages and profits in a Keynesian equilibrium system. The following Keynesian identities are used:
Y = P + W (1)
and
I = S (2)
where Y stands for national income, P for profits, W for wages, I for investment, and S for saving. Writing sp and sw for the (average and marginal) saving propensities of profit and wage earners respectively, we can express total savings as
S = spP + swW (3)
I = spP + sw(Y - P) (4)
Dividing by Y and regrouping the items we get the Kaldorian distribution formula:
To call a formula an ‘identity’ has ceased to be an offending remark. We know that well-chosen identities, bringing together economically and statistically relevant concepts in a novel manner can have extremely stimulating effects on economic theorizing. The quantity formula has played a role of this sort in monetary theory.2 I think that Kaldor’s formula has already proved its capacity of acting as a stimulant (or ‘irritant’ to some people) in distribution discussions and it will continue to be useful as a peg on which to hang diverse considerations.3 In this way it is also regarded in the following pages where it serves as a basis for a few tentative considerations on some aspects of short-term (section III) and long-term (section IV) distribution problems. But at first a few words on Kaldor’s distribution theory may be in order.
